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Gap in Cayman market for Blue Ocean Re – Adrian Lynch

Luke Harrison
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Gap in Cayman market for Blue Ocean Re – Adrian Lynch

There was a gap in the Cayman Islands insurance market for Blue Ocean Reinsurance Group, the company’s CEO, Adrian Lynch, has told Captive Intelligence.

Blue Ocean Re was formed earlier this year and provides reinsurers and larger complex captives in Cayman with tailored solutions, guidance, and strategies to help optimise their risk management.

Lynch said his thinking evolved over the past 12 to 18 months during conversations with Graham Mackay, a former CEO of a reinsurance company and a 40-year industry veteran, and Ruwan Jayasekera, former insurance regulator in the jurisdiction.

“The three of us came to the conclusion that there was a gap in the market in terms of what we were looking to do,” Lynch added.

Mackay is president and chief financial officer of Blue Ocean Re, while Jayasekera is chief operating officer.

Lynch said that having run start-up reinsurers previously, he knew it is a very different value proposition compared to running a captive.

“The error that the insurance managers are making is presuming upon the fact that they have the skill sets, technology, and the knowledge to run these reinsurers the same way that they’re trying to run what is essentially a commoditised product in captive management.”

Lynch said the company’s business plan is quite “comprehensive”.

“It revolves around obtaining an insurance management license, which enables us to manage various B3 reinsurers,” he explained.

“Even some Class D entities that have their own teams or are in the process of building them can also rely on us for specific aspects of their service needs.”

Lynch said the company is less focused on B1 captives, which are single parents.

“They are probably more suited to the larger insurance managers,” he said.

“That’s not really a market we’re targeting, it’s the third-party insurers, third-party reinsurers, the B3’s and the Class D’s, as well as the larger complex captives.”

He told Captive Intelligence that the company is in the process of acquiring a company management licence and a trust licence.

“Additionally, we’re obtaining a securities investment licence, as we find ourselves at the intersection of capital, insurance, and reinsurance, which has led us into capital raising opportunities,” he added.

“We’re securing all the necessary licences to support this expansion across our platform, and with these developments we anticipate being on a growth trajectory for the next few years.”

Lynch said he’s received “palpable validation” of the business model from the individuals and organisations he has engaged with.

“Additionally, there are asset managers looking to enter the reinsurance sector, but lacking expertise in insurance,” he said.

“We offer to manage all aspects of insurance for them, allowing them to focus on their core competency, asset management.”

Captives part of new Marsh Global Alternative Risk Solutions practice

Luke Harrison
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Captives part of new Marsh Global Alternative Risk Solutions practice

Marsh has launched Global Alternative Risk Solutions, a new practice which will encompass its expertise in parametric solutions, alternative risk transfer, captives and complex risk.

Global Alternative Risk Solutions will align existing capabilities from Marsh Specialty, Global Placement, Captive Solutions, and Advisory.

The new practice will be led by Christophe Letondot, a professional with 30 years of experience in financial services, including nearly a decade with Marsh working on alternative risk transfer, structured credit and parametric solutions.

“Leading Global Alternative Risk Solutions is an incredible opportunity to drive innovation and shape the future of risk management,” Letondot said.

“Together, we will embrace data-driven insights and cutting-edge technologies to unlock new opportunities and empower our clients to thrive in an increasingly complex risk landscape.”

The new practice will also work with Guy Carpenter to access capital pools, including insurance linked securities markets for corporate clients.

Letondot will report to Pat Donnelly, president of Marsh Specialty and Global Placement, and work closely with John Donnelly, global head of placement, as well as other Marsh leaders.

“Global Alternative Risk Solutions represents our commitment to being the risk advisor of the future and providing clients with easily accessible, cutting-edge risk management solutions,” Donnelly said.

“This practice will empower our clients to navigate the ever-changing risk landscape with confidence and resilience.”

Iowa passes bill to lower taxes on captive premiums

Luke Harrison
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The latest captive domicile in the United States, Iowa, has passed Bill 2636, which reduces the tax burden for captives writing premiums above $40m and $60m.

Iowa’s tax on captive premiums written above $60m has been reduced to 0.02%, down from the original 5%.

Captive premiums written above $40m will be now taxed at 0.045% by the State rather than 5%.

The Bill maintains the tax rate of 0.02% on the first $20m of premium and 0.125% on the following $20m.

Iowa has dedicated captive insurance regulators, and the Insurance Division has a captive insurance bureau to carry out its obligations.

Current Iowa legislation allows companies to form pure, association, protected cell, special purpose and industrial insured captives in the jurisdiction.

Captive Intelligence published an article in June highlighting that Iowa is likely to become the next US state to embrace captives, which would make it the thirty-sixth US jurisdiction to adopt captive insurance legislation, including the District of Columbia.

Workers’ comp captive suitability continues, gateway for further lines

Luke Harrison
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Workers’ comp captive suitability continues, gateway for further lines
  • Programme structures have evolved, but remains common captive line
  • Helps captives to build reseves and investment income
  • Group captives common structure due to predictability of losses

Workers’ compensation is one of the most popular lines for captives to insure in the United States, with its predictability and stability allowing captives to build surplus and write more volatile risks.

As a result of its predictability, group captives are a popular structure to write workers’ compensation as members of the group generally feel secure in risk sharing.

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DARAG Insurance Guernsey completes acquisition of large Cayman captive

Luke Harrison
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DARAG Insurance Guernsey has completed the signing of a sale and purchase agreement (SPA) to acquire a Cayman domiciled (re)insurance captive.

The SPA is subject to regulatory approval from the Cayman Islands Monetary Authority.

DARAG intends to merge its Guernsey vehicle with the acquired captive in due course and reinsure the longer tail portion of the portfolio to its core risk carrier in Germany, DARAG Deutschland AG.

The captive was acquired from a large multinational corporate, has long tail UK employers’ liability exposure and DARAG said it is one of the larger transactions completed by the company in the captive market.

 “This transaction is further evidence of DARAG’s dominance in the captive legacy space as well as its continued interest in acquiring and managing UK EL exposure,” said Tom Booth, CEO of DARAG.

“The Group is confident, given the advanced nature of a number of other attractive opportunities in its core European market, that 2024 will deliver excellent growth.

“We look to the future with increasing confidence as demand for our legacy solutions is plentiful, investment yields and capital efficiency continue at attractive levels and competition at the small to mid-sized end of the legacy market reduces.”

In February, DARAG Group completed two undisclosed captive legacy transactions in Bermuda and the Cayman Islands, as well as one in Hawaii.

In October, DARAG concluded a novation agreement between an undisclosed Benelux based captive, the captive’s policyholder and DARAG’s German insurance carrier, DARAG Deutschland AG.

European Parliament rubber stamps Solvency II reform for captives

Richard Cutcher
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European Parliament rubber stamps Solvency II reform for captives

The European Parliament has voted overwhelmingly in favour of proposed amendments to the Solvency II directive that would bring some regulatory relief to captives from 2026.

Captive Intelligence reported in March that regulatory concessions for “small and non-complex undertakings”, which should include most captives, had been agreed after lobbying from FERMA and the wider captive industry.

The European Parliament voted overwhelmingly in favour of the amendments on 23 April with 549 in favour, 56 against and nine abstentions.

The final text is expected to be published next month and the changes will come into effect from 1 January, 2026.

Charles Low, head of EU affairs at FERMA, told Captive Intelligence that while the reforms had not quite as far as hoped, they were still viewed positively by the Federation.

“It should lead to a lot of relief for quite a lot of captives, so we view this very positively,” he said.

Captive Intelligence has seen the amendments, although they have yet to be published alongside the existing rules.

FERMA had lobbied and hoped for a new “captive undertaking” to be defined under Solvency II, but the EU has not gone down this route.

It does, however, cite captives under its definition of small and non-complex undertakings: “‘Small and non-complex undertaking’ means an insurance and reinsurance undertaking, including a captive insurance undertaking and a captive reinsurance undertaking, that meets the conditions set out in Article 29a and has been classified as such in accordance with Article 29b.”

It is expected the majority of European-domiciled captives will fall into the new small and non-complex undertakings class, which would benefit from increased proportionality from supervisors.

The amendments state: “Undertakings complying with the risk-based criteria should be able to be classified as small and non-complex undertakings pursuant to a simple notification process.

“… Once classified as small and non-complex undertaking, in principle, it should automatically benefit from identified proportionality measures on reporting, disclosure, governance, revision of written policies, calculation of technical provisions, own-risk and solvency assessment, and liquidity risk management plan.”

The reforms do go on to specifically mention captive insurance and reinsurance undertakings in the context of the new “small and non-complex undertakings”.

“Captive insurance undertakings and captive reinsurance undertakings which only cover risks associated with the industrial or commercial group to which they belong, present a particular risk profile that should be taken into account when defining some requirements, in particular on own-risk and solvency assessment, disclosures and the related empowerments for the Commission to further specify the rules on such requirements,” the text outlines.

“Moreover, captive insurance undertakings and captive reinsurance undertakings should also be able to benefit from the proportionality measures when they are classified as small and non-complex undertakings.”

One of the more significant changes that would impact qualifying captives is an exemption to the requirement for audit of the annual solvency and financial condition report.

“Because of the particular risk profile and specificity of captive insurance undertakings and captive reinsurance undertakings, it is appropriate not to impose on them the audit requirement.”

Another specific example of exemptions from reporting is on climate change risks and scenarios.

“In particular, while the assessment of the materiality of exposure to climate change risks should be required from all insurance and reinsurance undertakings, long-term climate change scenario analyses should not be required for small and non-complex undertakings,” the amendments state.

It is unlikely further changes will be made to the text with vote scheduled for 23 April. If successful, the reforms will come into effect in 2026.

AM Best revises Trisura outlook to stable from negative

Luke Harrison
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AM Best has revised the outlooks to stable from negative and affirmed the financial strength rating of A- (excellent) and the long-term issuer credit ratings of “a-” (excellent) of the operating entities of Toronto-based Trisura Group and related entities.

The ratings reflect Trisura’s overall balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

In March 2023, AM Best revised its outlook for Trisura Group to negative from stable, after the insurer had revealed a CAD 81.5m one-time write-down of reinsurance recoverables in Q4 resulting from its fronting of a US property and casualty captive programme.

In April 2023, Captive Intelligence published a Long Read highlighting that Trisura Group’s write-down and subsequent stock drop had caught the fronting, and wider commercial market’s attention, but fears of a “race to the bottom” were not expected to impact traditional pure and group captive programmes.

The revision of the outlooks to stable from negative reflects improved ERM practices, policies and procedures around Trisura’s risk management of US captive reinsurance contracts.

As a result, Trisura has renewed all its ongoing programmes successfully and reduced its overall captive exposure.

AM Best said these changes have been effective and are reflected in the company’s improving operating performance.

AM Best noted that the ratings of First Founders Assurance Company (FFAC) remain unchanged following the news that Trisura has closed on the acquisition of FFAC last month.

FFAC is licensed currently in New Jersey and New York but will expand licensing to all 50 states and the District of Columbia.

“The acquisition rounds out Trisura’s business profile as FFAC is a treasury licensed surety provider,” AM Best said.

Group captives a fast-growing trend in the US – AXA XL’s Mark Benz

Luke Harrison
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The utilisation of group captives in the United States is expanding as companies look to share risk, according to Mark Benz, head of group captives at AXA XL.

Middle market insureds are most likely to look to be members of a group captive structure.

“They are typically coming out of the guaranteed cost environment where they’re sending premium to a carrier without the potential of getting anything back for good performance,” Benz told Captive Intelligence.

He said AXA XL is trying to take the top performers in those middle markets.

“What ends up happening is when they join the group captive, and they keep outperforming their loss projections, keep adding more loss control, they start getting some of those funds back in the form of dividends, and that really incentivises them to do better.”

Benz said group captives are a fast-growing trend in the US, and they used to be considered as an alternative market, “but now I would actually look at them as just another market”.

“It’s no longer people are trying to find them; they’re out there, and they’re probably $5bn to $7bn in premium.”

Captive Intelligence reported earlier this month that Captive Resources had now surpassed $4bn in annual premium going through the group captives it consults on.

Depending on the industries and the risks involved, some group captives are heterogeneous while others are homogenous.

“It’s spread across different industries, and it depends on the model they’re looking at,” Benz added.

If it’s a heterogeneous captive, they are usually diverse in their industry segments and geographic locations.

“If we are talking about a homogeneous captive, a lot of them are focused on construction, transportation, agriculture, and really those specific industries where it pays to bring together those insureds and bring them in one room,” he said.

Benz said the benefit of a group captive for these companies is that they can talk about their issues and what they’re seeing, in addition to focusing on loss control and risk control mitigation techniques.

“This helps the board meeting flow better in some circumstances,” he said. “The heterogeneous captive also gives insight from all the other markets, so clients do get to pick up something there too, if they are an insured in a heterogeneous captive.”

Pure captives, SPCs and group captives grow in Cayman

Luke Harrison
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The Cayman Islands Monetary Authority has published its captive figures for the first quarter of 2024, showing growth in the number of pure captives, segregated portfolio companies (SPCs) and group captives.

The number of pure captives domiciled in Cayman is now 288, an increase of two compared to year-end 2023.

There were 154 SPCs at year-end 2023, with the number rising to 157 in Q1 2024.

The number of group captives has now increased by two to 129.

Pure captives in Cayman are now writing $5.4bn in total premium, while group captives are writing $4.8bn. SPCs are responsible for $4.5bn in premium.

Assets under management (AuM) totals $20.8bn for pure captives, $13.5bn for groups and $15.2bn for SPCs.

Captive Intelligence’s data on the number of captives shows that there was a total of 41 new captive formations in the Cayman Islands in 2023, which took the total number of captives in the domicile to 567 at year-end.

Mauritian companies Fortree and Reinsurance Solutions announce partnership

Luke Harrison
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Mauritian companies Fortree and Reinsurance Solutions announce partnership

Fortree Management Services (Fortree) and Reinsurance Solutions are partnering to bring together their connecting experience and expertise.

Reinsurance Solutions is one of the largest independent African-owned reinsurance broking groups on the continent.

The firm is headquartered in Mauritius and has offices in Africa and London from where it services reinsurance clients across the broader continent and Indian Ocean islands.

Reinsurance Solutions has in-depth knowledge of the various African reinsurance markets and locally focused skill sets in these regions.

They have expertise all conventional lines of business, such as property, engineering, political & social risks, aviation, professional / financial lines, marine, energy, and liability amongst others.

“By combining our reinsurance broking expertise and captive capabilities with Fortree’s management expertise, we can empower businesses to take greater control of their risk financing strategies and potentially achieve cost savings,” said Blessing Chiguye, executive head at Reinsurance Solutions.

“This is a mutually beneficial partnership that will greatly assist current and potential captive owners or those businesses looking to redomicile jurisdictions.”

Fortree is based in Mauritius and provides a suite of financial services to meet clients’ business needs ranging from global business companies, trusts, authorised companies, to captive insurance, family office, insurance broker, and relocation to Mauritius.

The company leverages its experience and global network to tailor solutions that will help companies with their business objectives.

Fortree and Reinsurance Solutions share a common goal to make Mauritius the preferred pure captive insurance jurisdiction in the African region, together with the support of the Mauritian regulators.

They believe they have a successful platform for potential captive owners through their services ranging from company incorporation and licensing, administration, company secretarial, directorships, accounting and tax, compliance functions, corporate governance to underwriting, brokering, reinsurance and insurance management.

“It is with great humility that we are announcing this strategic alliance,” said Kaviraj Nuckchedee, director & head of captive insurance at Fortree.

“Mauritius has all the ingredients required to position itself as a centre of excellence for pure captive insurance and this is the direction we are heading together with our strategic partner, Reinsurance Solutions.

“The latter being among the leading reinsurance broking companies in the African Region will enhance the gaming field on the captive insurance front and with that together we will provide a seamless experience to clients.”

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